With the Government having recently reinforced its commitment to the community development finance institution (CDFI) sector, attention is increasingly turning to how more capital can reach underserved small businesses. The Impact Investing Institute has launched a new project to explore how a broader range of investors can help scale the sector’s reach and impact.
Small businesses are the lifeblood of the UK economy, creating jobs where people live, driving innovation and contributing to the vitality of local communities. Yet many viable small businesses continue to face barriers in accessing the finance they need to start, sustain and grow their operations.
CDFIs play a critical role in addressing this challenge. By combining robust credit assessment with relationship-based lending, local knowledge and tailored business support, they are able to support viable businesses in communities and places that are often underserved by conventional finance.
The impact of CDFIs is clear. According to Responsible Finance’s latest Impact Report, in 2025:
- 88% of borrowers had previously been declined elsewhere
- 99% of lending supported businesses outside London
- 43% of loans went to businesses in the UK’s 35% most deprived areas
- 37% of loans supported women-led businesses
- 21% of loans supported ethnic minority-led businesses
This translates into tangible outcomes: new businesses launched, local jobs created and safeguarded, and investment flowing into communities often overlooked by mainstream finance.
Recent years have seen significant efforts to strengthen the sector’s access to capital. Initiatives including the £62 million Community Investment Enterprise Fund, backed by £43 million from Lloyds Bank, and the UK Government’s independently run economic development bank, British Business Bank’s Community ENABLE Funding programme have increased the availability of capital for enterprise-lending CDFIs.
Attention is now turning to how a wider range of investors can complement this support. The second phase of the Community ENABLE Funding programme includes an objective to attract private investment, while the newly established UK Community Finance Partnership Taskforce has set out a roadmap to unlock £1 billion for the sector over the next five years through partnerships with banks and other investors.
As part of our work to accelerate the field of impact investing and transform capital markets to support a fairer, greener, more resilient future, the Impact Investing Institute has launched a project to engage new investors and partners in enterprise-lending CDFIs.
Commissioned by Responsible Finance as part of a wider programme funded by JPMorganChase to help build the operational capacity of the community finance sector, the project will draw on lessons from the more established US CDFI market, where participation from a diverse range of investors has helped strengthen and scale the sector. Working with stakeholders across the market, the project will build awareness of the investment case for CDFIs and explore investment structures that could attract capital beyond the banking sector while preserving the distinctive strengths of the CDFI model.
Over the coming months, we will begin engaging with combined and local authorities, wealth managers, family offices, foundations and institutional investors to better understand investor appetite, identify barriers to investment and explore practical routes to mobilising new capital for the sector.
If your organisation would like to contribute to this work or learn more about the project, please contact Ngozi Aguoru, Programme Coordinator, at ngozi.aguoru@impactinvest.org.uk.